Unfortunately, if you are in the 25% bracket, you will owe another $1,000 dollars in tax on this withdrawal. The hardship rules are there to allow you access to the money, but don't get you out of the income tax.
There are a few exceptions to the 10% penalty. They include disability, medical expenses that exceed 7.5% of your adjusted gross income, and separation from service after age 55.
Sorry for the bad news. Let me know if you need any more information.
The 10% tax withheld from your check only covers the penalty. You still must include the $4,000 as income and pay any additional tax it creates.
If you add a dependent, this will give an exemption of $3,650, and the child tax credit of $500. This should offset all of the tax on the $4000. (If you file Married Joint, the tax credit it $1,000. In general, you will pay less tax filing jointly.)
One more question and I will leave you alone I promise, lol
I am divorced and I pay child support to my ex wife. Can I claim my child or if I do can she come back and get me in trouble with the IRS?
Usually the decision of which parent can claim a child is put into the divorce agreement. If this was not included in your agreement, then the custodial parent gets the dependent. Per the IRS, the custodial parent is the one the child spends the most time with.
If you are not the custodial parent, to claim the dependent, you need to get permission with a form 8332 signed by the custodial parent and attach it to your return. Here is a link to the form:
If you claim the child without this permission (assuming you are NOT the custodial parent), then yes, if she also claims the child, the IRS will contact you. You will lose the exemption, credit, and owe penalties.
Also, if you are legally divorced by the end of this year, you should be filing Single, unless you are the custodial parent, then you can file Head of Household.
Thanks again for your questions. I don't mind follow up questions. Taxes and divorce issues are tricky.